Host Hotels Expects to Profit in 2012

Host Hotels & Resorts (HST) expects to check out of 2012 with a profit after two money-losing years in a row. The Bethesda, Md., real estate investment trust (REIT) is a leading owner of hotels operated under franchise agreements and has such premium brand names has Marriott, Westin, Hyatt and Ritz-Carlton.

Host Hotels & Resorts controls 121 properties, including 105 in the United States and 16 in other countries, with a total of about 65,000 rooms. The company also has interests in joint ventures that operate 13 hotels in Europe and are developing seven in India.

Host reported 6.1 percent growth last year in revenue per available room compared to 2010, reflecting better pricing and occupancy rates.

The company nevertheless posted a net loss of $15 million last year, down from net losses of $132 million in 2010 and $257 million in 2009. Revenue increased to $4.99 billion last year, up from $4.42 billion in 2010 and $4.13 billion in 2009.

Host has suffered annual losses since 2008, the last year revenue topped $5 billion.

The company expects earnings per diluted share this year in the range of 8 cents to 15 cents, based largely on the company's expectation that revenue per available room will increase between 4 percent and 6 percent this year from last year's level.

Host also intends to increase its quarterly dividend for the first quarter to 6 cents per share, a penny more than the payout for the fourth quarter of last year.

Most stock analysts have hold ratings on Host; the rest recommend buying the stock.

Fitch Ratings recently affirmed its credit ratings on Host Hotels & Resorts, including its BB issuer default rating, and reported that the rating outlook for the company was stable.

"The affirmation reflects the continued solid recovery in lodging demand trends, despite the global macroeconomic risk," Fitch reported Feb. 29. The rating agency expects the U.S. hotel industry's revenue per available room to increase 4 percent to 5 percent this year, with HST “growing in line with the industry average."

Solid finances

Fitch also reported that Host's financial liquidity "is solid and is expected to remain so," and that the company has "a manageable near-term debt maturity schedule with less than 15 percent of total debt maturing through 2013."

Host is financially flexible because most of its hotels are unencumbered by mortgage debt, and its locations are geographically diverse, with domestic hotels in 26 states and hotels that have opened in "Australia, New Zealand and Brazil over the last two years, further diversifying its international presence."